11 October 2021
LLP is registered under Government of India-Ministry for commerce and industry-Department for Promotion of Industry and Internal Trade Certificate states that Start up is working in 'Human Resources' Industry and 'Recruitment Jobs' sector as self-certified by them.
My question is whether income tax benefits u/s 80IAC and 56(2)(viib) will be available to the start up and whether to avail the benefits any form needs to be submitted to Assessing Officer ?
11 July 2024
Startups that are recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) under the Startup India initiative may be eligible for certain income tax benefits under sections 80IAC and 56(2)(viib) of the Income Tax Act, 1961. Here’s how these benefits apply and the procedure to avail them:
1. **Section 80IAC Benefits:** - **Eligibility:** Section 80IAC provides a deduction of 100% of the profits and gains derived from an eligible business by an eligible startup for 3 consecutive assessment years out of 7 years beginning from the year of incorporation. - **Conditions:** To avail this benefit, the startup must be engaged in an eligible business, as defined under the Startup India scheme, and must obtain certification from the Inter-Ministerial Board (IMB) setup by DPIIT.
2. **Section 56(2)(viib) Benefits (Angel Tax Exemption):** - **Eligibility:** Section 56(2)(viib) provides for exemption from angel tax for investments received by eligible startups from resident investors. - **Conditions:** The startup must be recognized by DPIIT and must comply with the conditions specified by DPIIT regarding the nature of the business and the amount of investment.
3. **Procedure to Avail Benefits:** - **Startup Recognition:** Ensure that your LLP is duly recognized by DPIIT under the Startup India scheme. The recognition certificate issued by DPIIT specifies the sectors and industry in which the startup is certified. - **Intimation to Assessing Officer:** Generally, startups recognized by DPIIT are automatically considered for these benefits by the Income Tax Department. However, it is advisable to inform the Assessing Officer (AO) about the startup’s recognition and intention to avail the benefits under sections 80IAC and 56(2)(viib). - **Documentation:** Keep all relevant documents handy, including the DPIIT recognition certificate, for submission if required by the AO during assessments.
4. **Annual Compliance:** Even though there may not be a specific form to be submitted initially, startups are required to maintain proper documentation and comply with all statutory requirements under the Income Tax Act to continue availing these benefits.
5. **Consultation:** It’s recommended to consult with a qualified chartered accountant or tax advisor who is familiar with startup tax benefits and can provide specific guidance based on your LLP’s situation and compliance requirements.
By adhering to these steps and ensuring proper documentation and compliance, your LLP can effectively avail the income tax benefits available under sections 80IAC and 56(2)(viib) as recognized under the Startup India initiative.
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